Rebel John Menzies shareholder to seek support

John Menzies is being urged to split up. Picture: TSPL

John Menzies is being urged to split up. Picture: TSPL

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THE activist shareholder urging­ John Menzies to consider splitting up will raise the ante at this week’s annual meeting in Edinburgh by addressing other investors directly from the floor.

Swiss firm Lakestreet Capital Partners has claimed the aviation services and news­paper distribution group is “dramatically undervalued” by having two “non-synergistic businesses”. It is understood that Lakestreet, run by chief executive Valentin Pierburg and chief investment officer Christian Kappelhoff-Wulff, has decided to amplify at the annual meeting why it believes a demerger would release significant value in the company.

However, the investor has put down no resolutions for change at the meeting and it is understood its tone will be markedly less confrontational than the recent other high-­profile case of shareholder ­activism in Scotland, at Dundee-­based Alliance Trust.

One City analyst said: “Lakestreet has said it wants to continue to hold constructive talks with Menzies’ management and has put no resolutions down. This is very different to an Alliance Trust situation, where it got very contentious.

“This is very unlikely to be any sort of showdown AGM. This will go on for some time. Lakestreet may also be waiting to see if their action leads to other investors going public with support for a demerger of the Menzies’ businesses.”

Since Lakestreet’s initial ­announcement on 30 April, ­Kabouter Management, which holds a 9 per cent stake in the Edinburgh-based company, has said its structure of operating in two unrelated sectors “contributes significantly to the undervaluation of John Menzies’ stock today”.

Activist shareholder Elliott Advisors was locked in a war of words with Alliance’s management ahead of its AGM last month, with the hedge fund putting down a resolution to have three new non-executives voted onto the trust’s board.

In a climbdown by Alliance, it agrees to two of Elliott’s nominated directors being ­accepted.

However, Lakestreet, which holds a 3 per cent stake in Menzies after buying shares since late last year, is seen as being in a weaker position to enforce change than Elliott, which had amassed a 12 per cent stake in Alliance.

A further complication is that the Menzies family and related parties are said to speak for about 30 per cent of the company.

“Therefore, any significant corporate shift would need family support in our view,” said broker N+1 Singer in a note to clients.

N+1 Singer claims significant potential value could be unlocked at the company if there is delivery on a turn­around strategy “whether the group is broken up or not”.

The broker also said there was much corporate activity in the aviation services industry, and if Menzies Aviation was put up for sale “there would likely be significant interest from private equity”.

Lakestreet declined to comment, while members of the Menzies family were unavailable for comment. The Swiss activist has claimed that if Menzies Distribution and Menzies Aviation were valued on a standalone basis, the enterprise value of John Menzies could be about £525m.

The company, which last month slashed its full-year dividend almost 40 per cent following a slide in annual profits, has a current market capitalisation of about £235m.

Lakestreet has said it has had “constructive” discussions with Menzies’ management, headed by new chief Jeremy Stafford. Menzies has so far made no comment on the shareholder intervention, but is expected to break its silence at the AGM.

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